Ausenco Operations Pty Ltd v Ferretti International Ottoway Pty Ltd - [2020] SASC 46

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application for Judicial Review)
AUSENCO OPERATIONS PTY LTD & ANOR v FERRETTI INTERNATIONAL OTTOWAY PTY LTD & ANOR
[2020] SASC 46
Judgment of The Honourable Justice Doyle
1 April 2020
ADMINISTRATIVE LAW - JUDICIAL REVIEW - GROUNDS OF REVIEW - JURISDICTIONAL MATTERS
ADMINISTRATIVE LAW - JUDICIAL REVIEW - GROUNDS OF REVIEW - PROCEDURAL FAIRNESS - HEARING - NATURE OF HEARING - OPPORTUNITY TO PRESENT CASE
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - REMUNERATION - STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS - ADJUDICATION OF PAYMENT CLAIMS
The plaintiffs seek an order in the nature of certiorari quashing an adjudication determination made by the second defendant (the Adjudicator) under the Building and Construction Industry Security of Payment Act 2009 (SA) (the SOP Act) on 12 November 2019 (the Determination).
The plaintiffs (Ausenco Operations Pty Ltd and Downer EDI Engineering Power Pty Ltd (relevantly trading as the Ausenco Downer Joint Venture (ADJV)) and the first defendant (Ferretti International Ottoway Pty Ltd (Ferretti)) entered into a written contract on or about 23 November 2018 that provided for Ferretti to fabricate and supply piping for the construction of mining infrastructure.
On 2 September 2019, Ferretti served ADJV with a payment claim in the sum of $678,081.18 (including GST) for works done under the Contract. On 20 September 2019, ADJV responded by serving a payment schedule which stated that the sum payable was “Nil”, and included a claim that it was entitled to set off $201,110 by way of liquidated damages under the contract.
On 11 October 2019, Ferretti lodged an application for adjudication under the SOP Act. It served the adjudication application upon ADJV on 14 October 2019, and it was accepted by the Adjudicator on 18 October 2019. On 22 October 2019, ADJV lodged its adjudication response.
On 12 November 2019, the Adjudicator made the Determination, which required that ADJV pay Ferretti the sum of $410,118.75. This sum was paid by ADJV to Ferretti on 19 November 2019.
In arriving at the sum payable in the Determination, the Adjudicator rejected ADJV’s claim that it was entitled to liquidated damages. The Adjudicator did so on the basis that because he was not able to identify the “Date for Delivery” contemplated by the contract, ADJV had not established any entitlement to liquidated damages under the contract.
In these judicial review proceedings, ADJV contends the Adjudicator failed to afford it procedural fairness in that he rejected its claim for liquidated damages on a basis not contended for by either party, and in respect of which neither party was given an opportunity to make submissions. ADJV contends that the Adjudicator thus fell into jurisdictional error, entitling it to the relief sought.
Held, per Doyle J, allowing the application:
1. In considering ADJV’s claimed entitlement to liquidated damages, the Adjudicator was constrained to a consideration of the matters raised by the parties. The only grounds available for rejecting that claim, without at least requesting further submissions from the parties under s 21(4) of the SOP Act, were those raised by Ferretti in its Adjudication Application.
2.      By rejecting ADJV’s claimed entitlement to liquidated damages on a basis not contended for by Ferretti, ADJV was denied procedural fairness.
3.      The denial of procedural fairness was a substantial one, in that the submissions which ADJV was denied an opportunity to make had a real prospect of influencing the result on the issue of liquidated damages.
4.      Accordingly, the Adjudicator’s Determination was infected by jurisdictional error warranting orders that it be set aside, and the monies paid by ADJV to Ferretti should be repaid.
Building and Construction Industry Security of Payment Act 2009 (SA) ss 20(4), 21(1), 21(2), 21(3), 21(4), 21(6), 22(1), 22(2), 22(3), referred to.
Built Environs Pty Ltd v Tali Engineering Pty Ltd [2013] SASC 84; Caltex Refineries (Qld) Pty Ltd v Allstate Access (Australia) Pty Ltd [2014] QSC 223; John Holland Pty Ltd v TAC Pacific Pty Ltd [2010] 1 Qd R 302; Musico v Davenport [2003] NSWSC 977; Ostwald Bros Pty Ltd v Jaylon Pacific Pty Ltd [2016] QSC 240, applied.
Abel Point Marina (Whitsundays) Pty Ltd v Uher [2006] QSC 295; David Hurst Constructions Pty Ltd v Helen Durham [2008] NSWSC 318; Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82, distinguished.
Brodyn Pty Ltd t/as Time Cost and Quality v Davenport (2004) 61 NSWLR 4; Grocon Constructors Pty Ltd v Planit Cocciardi Joint Venture (No 2) (2009) 26 VR 172; John Holland Pty Ltd v Cardno MBK (NSW) Pty Ltd [2004] NSWSC 258; Kioa v West (1985) 159 CLR 550; Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140; Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340; State Water Corporation v Civil Team Engineering Pty Ltd [2013] NSWSC 187; The Trustee for Allway Unit Trust Trading as Westside Mechanical Contracting Pty Ltd v R & D Airconditioning Pty Ltd [2018] SASC 46; Watkins Contracting Pty Ltd v Hyatt Ground Engineering Pty Ltd [2018] QSC 65, considered.

AUSENCO OPERATIONS PTY LTD & ANOR v FERRETTI INTERNATIONAL OTTOWAY PTY LTD & ANOR
[2020] SASC 46
Civil

DOYLE J: The plaintiffs seek an order in the nature of certiorari quashing an adjudication determination made by the second defendant (the Adjudicator) under the Building and Construction Industry Security of Payment Act 2009 (SA) (the SOP Act) on 12 November 2019 (the Determination).
By way of background, the plaintiffs (Ausenco Operations Pty Ltd and Downer EDI Engineering Power Pty Ltd (relevantly trading as the Ausenco Downer Joint Venture (ADJV)) and the first defendant (Ferretti International Ottoway Pty Ltd (Ferretti)) entered into a written contract on or about 23 November 2018 (the Contract). The Contract provided for Ferretti to fabricate and supply piping for the construction of mining infrastructure on a project located approximately 160 km north of Port Augusta, being the Carrapateena Copper Gold Mine project (the Project).
On 2 September 2019, Ferretti served ADJV with a payment claim in the sum of $678,081.18 (including GST) for works done under the Contract (the Payment Claim). On 20 September 2019, ADJV responded by serving a payment schedule which stated that the sum payable was “Nil” (the Payment Schedule). ADJV’s response in the Payment Schedule included a claim that it was entitled to set off $201,110 by way of liquidated damages under the Contract.
On 11 October 2019, Ferretti lodged an application for adjudication under the SOP Act (the Adjudication Application). It served the Adjudication Application upon ADJV on 14 October 2019, and it was accepted by the Adjudicator on 18 October 2019. On 22 October 2019, ADJV lodged its adjudication response (the Adjudication Response).
On 12 November 2019, the Adjudicator made the Determination, which required that ADJV pay Ferretti the sum of $410,118.75. This sum was paid by ADJV to Ferretti on 19 November 2019.
In arriving at the sum payable in the Determination, the Adjudicator rejected ADJV’s claim that it was entitled to liquidated damages. The Adjudicator did so on the basis that because he was not able to identify the “Date for Delivery” contemplated by the Contract, ADJV had not established any entitlement to liquidated damages under the Contract.
In these judicial review proceedings, ADJV contends the Adjudicator failed to afford it procedural fairness in that he rejected its claim for liquidated damages on a basis not contended for by either party, and in respect of which neither party was given an opportunity to make submissions. ADJV contends that the Adjudicator thus fell into jurisdictional error, entitling it to the relief sought.
For the reasons which follow, I accept ADJV’s contention that the Adjudicator fell into jurisdictional error, and that it is entitled to the relief sought.
The Contract
The Contract between the parties consisted of a Purchase Order dated 23 November 2018, and the appended General Conditions and Special Conditions.
Under clause 9.8 of the General Conditions,[1] Ferretti was liable to pay liquidated damages to ADJV at the rate set out in Annexure 1 to the Contract if Ferretti failed to deliver the fabricated piping, or a separable portion of it, “by the respective Date for Delivery”. And under clause 17.2, ADJV was entitled to set off against monies otherwise due to Ferretti any debt or other monies due from Ferretti to ADJV which were due and payable under the Contract. This right extended to the right to liquidated damages from Ferretti because, under clause 9.8, “liquidated damages will be a debt owing from [Ferretti] to [ADJV].”
[1] As amended by clause 17 of the Special Conditions.
For reasons which will become apparent, it is relevant to note that in clause 1.1 “Date for Delivery” was defined to mean “the date by which [Ferretti] will deliver the Equipment [i.e. fabricated piping] to the Delivery Place, being the date set out in the Purchase Order as may be extended pursuant to clause 8.”
I also note that the Purchase Order itself included various “Purchaser’s Requirements”, which included a requirement, under the heading “Delivery”, that “Piping Fabrication … is to be delivered … as per the Purchase Order delivery date.” In addition to this, Annexure 1 to the General Conditions included an item “Date for Delivery” that specified “As per each Tranche”.
The Contract included, in clause 8, provision for variations to the contractual works through the issuing of “Purchase Change Orders”. As it happens, several Purchase Change Orders were issued by ADJV and delivered to Ferretti under this clause. These Purchase Change Orders provided for additional tranches of fabricated piping that had not been included in the first tranche provided for in the initial Purchase Order.
The Payment Claim and Payment Schedule
Ferretti’s Payment Claim was for an amount of $678,081.18 in respect of works under the Contract. In Ferretti’s letter to ADJV of 2 September 2019 enclosing the Payment Claim, Ferretti referred to its earlier correspondence (including a letter of 28 August 2019) in which it had rejected the contention that it had caused delays entitling ADJV to liquidated damages.
In its Payment Schedule, ADJV not only challenged Ferretti’s entitlement to various of the amounts claimed, but also included two claims by way of set off. The first was on account of rectification costs for defective work, and the second was on account of liquidated damages. In support of the claimed entitlement to set off $201,110 in liquidated damages, the Payment Schedule stated:
The Contract, by clause 9.8, provides that if Ferretti fails to deliver the Equipment by the respective Date for Delivery then Ferretti will be liable to ADJV for liquidated damages at the rate specified in Annexure 1 – General Conditions of Purchase Specifics, for every day after the Date for Delivery, up to and including the Date of Delivery.
The rate specified in Annexure 1 is $2,000/day of each Tranche.
Ferretti’s liability to ADJV under clause 9.8 is however limited “up to 10% of each Tranche”.
Ferretti has failed to deliver the Equipment by the respective Date for Delivery as follows:
-     Tranche 00 – 74 days late;
-     Tranche 01 – 115 days late;
-     Tranche 02 – 132 days late;
-     Trance 03 – 145 days late;
-     Tranche 04 – 122 days late; and
-     Tranche 05 – 121 days late.
The liquidated damages payable for each Tranche exceed 10% of the respective value (see ADJV’s calculations ADJV-0104-MA-LT-010 and ADJV-0104-MA-LT-011).
The liquidated damages payable by Ferretti to ADJV are therefore limited to $201,110.00 (see calculations in ADJV-0104-MA-LT-011).
Accordingly, the sum of $201,110.00 is retained, deducted, set off or withheld from any amount otherwise due to Ferretti in accordance with clause 9.8 together with clause 17.2 of the Contract.
The reference in the above passage to Tranche 00 was to the fabrication work under the Purchase Order, and the references to Tranches 01 to 05 was to the fabrication work under five subsequent Purchase Change Orders.
The reference to ADJV-0104-MA-LT-010 was a reference to a letter from ADJV to Ferretti dated 5 August 2019 in which ADJV had notified a claim for liquidated damages in the amount of $201,110.00 and had set out the basis for the calculation of that amount. The calculation was set out in a table that provided a “PO Delivery Date” and “Actual Delivery Date” for each of the Tranches 00 to 05, with the liquidated damages for each Tranche calculated at the rate of $2,000 per day for the “Days Late” applicable to that Tranche (being the difference between the “PO Delivery Date” and “Actual Delivery Date”). The calculation resulted in a total of $1,296,000 but with the claim for liquidated damages then capped at the figure of $201,110 (being the total of 10% of the value of each of the Tranches).
The reference to ADJV-0104-MA-LT-011 was a reference to a letter from ADJV to Ferretti dated 16 August 2019 in which ADJV had responded to various matters that had been raised by Ferretti (in a letter dated 12 August 2019) in opposition to the claim for liquidated damages. In particular, ADJV had responded to contentions by Ferretti to the effect that the liquidated damages provided for in the Contract were excessive and operated as a penalty, and that ADJV had contributed to the delays incurred.
The Adjudication Application
As mentioned, on 11 October 2019, Ferretti lodged its Adjudication Application. It comprised documents including the Contract, the Payment Claim, the Payment Schedule, a statutory declaration of Robert McDonald (Ferretti’s project manager) and written submissions (with various schedules and attachments).
Mr McDonald’s statutory declaration addressed various matters relevant to the disputes between the parties. So far as is presently relevant, Mr McDonald included reference to the quotation documentation exchanged between the parties prior to entry into the Contract that referred to expected delivery lead times of 19 weeks from the placement of orders and receipt of approved for construction drawings, and that acknowledged that any change in the 14 week component of this referable to material procurement would affect the delivery schedule. Mr McDonald stated that, based upon these delivery timeframes from the quotation documentation, Ferretti was not late in delivering any portion or tranche of the fabricated piping. Mr McDonald went on to explain why he considered that various actions of ADJV had detrimentally impacted Ferretti’s ability to deliver the fabricated piping in the expected timeframes. He also referred to discussions between the parties which he said were to the effect that the 10% cap on liquidated damages under the Contract was to be calculated by reference to merely the value of the fabrication works (and hence excluding the component referable to materials). Under this approach, the cap on liquidated damages was $85,276.03, rather than the $201,110.00 contended for by ADJV.
In Ferretti’s submissions, after setting out the basis for the amount in its Payment Claim, Ferretti noted ADJV’s claimed entitlement to liquidated damages in its Payment Schedule, and responded:
The Claimant maintains for the reasons set out in Schedule C as annexed to this application that the Respondent has no right to set off or deduct liquidated damages in the sum of $201,110.00 (or any other amount) from the outstanding Contract sum otherwise due and payable to the Claimant.
Turning to Schedule C to Ferretti’s submissions, the matters raised in opposition to ADJV’s claimed entitlement to liquidated damages of $210,110 may be summarised as follows.
First, a contention (the quotation contention) that ADJV was not entitled to liquidated damages because the fabricated piping had not been delivered late. The essence of this argument was that the relevant dates for the purposes of determining whether delivery was late were not the dates in the Purchase Order and Purchase Change Orders used by ADJV, but rather the delivery timeframes indicated in the quotation documentation. And, as explained in Mr McDonald’s statutory declaration, delivery was not late relative to those delivery timeframes.
Secondly, a contention (the subsequent tranches contention) that in respect of the fabrication works the subject of the Purchase Change Orders (rather than the initial Purchase Order), being Tranches 01 to 05, the effect of the quotation documents and other communications in respect of those works had been to remove any entitlement to liquidated damages under the Contract.
Thirdly, a contention (the lower cap contention) that liquidated damages were capped at a level lower than the amount claimed by ADJV on the basis that a 10 per cent cap was to be applied only to the component of the works referrable to fabrication (and not materials).
Fourthly, a contention (the responsibility for delays contention) that in various respects ADJV was responsible for the delays that had occurred, or had not established a basis for its suggestion that Ferretti was responsible for delay events.
Fifthly, a contention (the penalty contention) that the liquidated damages provided for in the Contract were excessive and operated as a penalty, and hence were void and unenforceable.
Sixthly, a contention (the GST contention) in relation to the impact of GST upon the calculation of any liquidated damages payable.
The Adjudication Response
In its Adjudication Response, ADJV put various submissions in support of its claimed entitlement to liquidated damages, including by way of response to the matters raised by Ferretti.
ADJV’s submissions in relation to liquidated damages commenced by noting the contractual entitlement to liquidated damages under clause 9.8, and the reference in Annexure 1 of the General Conditions to the Date for Delivery being “as per each Tranche”. ADJV contended that the reference to Tranches was a reference to groupings of items of fabricated piping, as subsequently formalised through the Purchase Change Orders, and that each such Purchase Change Order stated the date by which the relevant items of fabricated piping had to be delivered (being the Date for Delivery under clause 9.8). Reference was then made to a supporting statutory declaration of Garry Tat which explained the dates used by ADJV, and the calculation of the amount claimed by way of liquidated damages.
ADJV’s submissions then addressed the various contentions advanced by Ferretti in opposition to the claim for liquidated damages. In response to the quotation contention, ADJV submitted that the timeframes divined from the quotation documents were irrelevant as those documents did not form part of, and were superseded by, the Contract. In response to the subsequent tranches contention, ADJV submitted that this should be rejected for similar reasons as those applicable to the quotation delivery timeframes contention. In response to the lower cap contention, ADJV put submissions in support of its position that the cap under the Contract should be construed as operating by reference to the total value of the works and not simply the component of those works which related to fabrication work. In response to the responsibility for delays contention, ADJV relied upon various factual matters as to the reasons for the delays that had occurred. ADJV’s Adjudication Response also included various submissions in response to the penalty contention and the GST contention.
The Determination

In the Determination, the Adjudicator rejected some of the items claimed by Ferretti in its Payment Claim, but allowed those items to the extent of $357,501.44. The Adjudicator also rejected ADJV’s offsetting claims for both liquidated damages and rectification costs. After allowing for GST, and amounts for interest and the adjudication fee, the total amount payable under the Determination was $410,118.75.
In rejecting ADJV’s claim for liquidated damages, the Adjudicator commenced by summarising the submissions on this topic in both Ferretti’s Adjudication Application and ADJV’s Adjudication Response. The Adjudicator then commenced his analysis of the claim for liquidated damages by accepting ADJV’s submissions to the effect that its entitlement to liquidated damages was governed by clause 9.8 of the Contract, and that this was to the exclusion of the quotation documentation relied upon by Ferretti. In coming to this conclusion, the Adjudicator relied in part upon the “Entire Agreement” provision in clause 27.4 of the General Conditions to the Contract. The Adjudicator thus rejected both the quotation contention and the subsequent tranches contention.
However, despite having accepted ADJV’s submissions to the effect that its entitlement to liquidated damages was governed by clause 9.8 of the Contract, the Adjudicator nevertheless rejected ADJV’s claim for liquidated damages in respect of the fabrication work the subject of the Purchase Order and the Purchase Change Orders. The Adjudicator reasoned:
I do not accept [Ferretti’s] position, given my view on the effect of clause 27.4. However, nor do I accept [ADJV’s] position that the Date for Delivery of the Purchase Order or Tranche 00 was 5 April 2019, given that: (a) I can find no date in the Purchase Order that is expressly referred to as the “Date for Delivery” for the work under the Purchase Order; and (b) I do not accept that the term “as per each Tranche” in Annexure 1 can be read as referring to the “Delivery Due” date for items 397 to 424 of the Purchase Order for the purposes of defining the “Date for Delivery” of all items in the Purchase Order.
For these reasons, I have no way of working out what amount of liquidated damages, if any, is claimable in respect of work items under the original Purchase Order.
In the case of the Purchase Change Orders, I can find no reference in the Contract, including in clause 8, which gives [ADJV] the unilateral power to issue Purchase Change Orders, that provide a “Date for Delivery” of the work under the Purchase Change Order for the purposes of clause 9.8. Each of the Purchase Change Orders includes a schedule of work items and provides a corresponding date in the “Delivery Due” column for each item. As with the original Purchase Order, the Purchase Change Orders have more than one “Delivery Due” dates.
For example, Purchase Change Order 05 (Respondent’s Tranche 05), which includes items 539 to 830, specifies 17 different “Delivery Due” dates in the range 1 February 2019 to 30 May 2019. The Respondent seeks to apply liquidated damages from 24 April 2019 for work under Tranche 05.
Even if I were persuaded that the “Date for Delivery” is to be found in the “Delivery Due” column for the items in a Purchase Change Order, I found nothing in clause 8 that gives the Respondent the power to unilaterally specify the “Date for Delivery” of work under a Purchase Change Order for the purpose of clause 9.8. Given the competing positions of the parties on the date that work under the Tranches was due, it seems to me that the dates stated in the Purchase Change Orders were not agreed. For these reasons, I have no way of working out the “Date for Delivery” for any of the Purchase Change Orders. For this reason, I am not satisfied that liquidated damages is due in respect of the work under the Purchase Change Orders.
For these reasons, I do not propose to deduct any amount for liquidated damages in my assessment of the progress payment.
The essence of the Adjudicator’s reasoning was thus (i) the Purchase Orders did not include express reference to a “Date for Delivery” for the purposes of clause 9.8; (ii) he did not accept that the date appearing in the “Delivery Due” column of the Purchase Order for items 397 to 424 (being the items relating to fabrication work) was the “Date for Delivery” for all of the items in that invoice for the purposes of clause 9.8; (iii) there was a similar problem with the Purchase Change Orders given the multiple dates in the “Delivery Due” column of those documents; (iv) he was not satisfied that the clause 8 power to issue Purchase Change Orders gave ADJV the power to unilaterally specify the “Date for Delivery” for the work under those Purchase Change Orders; and (v) he thus had no way of determining the “Date for Delivery” for the items in the Purchase Order or Purchase Change Orders, and hence no way of working out the amount of any liquidated damages that might be payable.
Having rejected ADJV’s claim to liquidated damages for these reasons, the Adjudicator decided that there was no need for him to address the balance of Ferretti’s contentions in opposition to the liquidated damages claimed by ADJV.
The plaintiff’s claim
As mentioned at the outset of these reasons, ADJV contends that the Adjudicator failed to afford it procedural fairness in that he rejected its claim for liquidated damages on a basis not contended for by either party, and in respect of which neither party was given an opportunity to make submission. In particular, ADJV contends that the Adjudicator’s conclusion that ADJV had not identified the relevant “Date[s] for Delivery” under clause 9.8 was not a conclusion contended for by Ferretti, and hence in respect of which it was not afforded an opportunity to make submissions.
Before coming to consider the merits of ADJV’s contention that it was denied procedural fairness, it is convenient to refer to the authorities governing the content of the obligation to afford procedural fairness in adjudications under the SOP Act and its interstate equivalents.
Procedural Fairness in the context of adjudication applications
The nature of the regime created by the SOP Act and its interstate equivalents has been described in a number of authorities.[2] It may be described as a parallel regime, separate from the contract, for the prompt making of progress payments under a construction contract. In short, the SOP Act is intended to provide a speedy and effective means of ensuring cash flow to builders from parties with whom they contract. It does so by creating a regime for quickly, informally and summarily determining, and enforcing the payment of, progress claims. It involves the determination and enforcement of progress claims on an interim basis; that is, without affecting the parties’ ultimate rights under the relevant construction contract in any subsequent civil proceedings in respect of that contract.
[2] Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1 at [36]-[44]; Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340 at [3]-[4]; The Trustee for Allway Unit Trust Trading as Westside Mechanical Contracting Pty Ltd v R & D Airconditioning Pty Ltd [2018] SASC 46 at [36].
It is accepted that an adjudicator’s determination under the SOP Act is subject to judicial review on the grounds of jurisdictional error, and that this category of error extends to a failure to afford procedural fairness. That has been held to be so in South Australia under the SOP Act,[3] and in the other states with analogous security of payments legislation.[4]
[3] Built Environs Pty Ltd v Tali Engineering Pty Ltd [2013] SASC 84 at [128].
[4] For example, Brodyn Pty Ltd t/as Time Cost and Quality v Davenport (2004) 61 NSWLR 421 at [57]; John Holland Pty Ltd v Cardno MBK (NSW) Pty Ltd [2004] NSWSC 258 at [10], [40]-[41]; Grocon Constructors Pty Ltd v Planit Cocciardi Joint Venture (No 2) (2009) 26 VR 172 at [133]-[139]; Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82 at [99]-[113]; John Holland Pty Ltd v TAC Pacific Pty Ltd [2010] 1 Qd R 302 at [39]-[40].
The content of the obligation to afford procedural fairness is, as always, informed by the nature of the statutory regime under which the adjudicator’s determination is made. As Mason J explained in Kioa v West:[5]
Where the decision in question is one for which provision is made by statute, the application and content of the doctrine of natural justice or the duty to act fairly depends to a large extent on the construction of the statute … What is appropriate in terms of natural justice depends on the circumstances of the case and they will include, inter alia, the nature of the inquiry, the subject-matter, and the rules under which the decision-maker is acting …
In this respect the expression “procedural fairness” more aptly conveys the notion of a flexible obligation to adopt fair procedures which are appropriate and adapted to the circumstances of the particular case. The statutory power must be exercised fairly, i.e. in accordance with procedures that are fair to the individual considered in the light of the statutory requirements, the interests of the individual and the interests and purposes, whether public or private, which the statute seeks to advance or protect or permits to be taken into account as legitimate considerations.
[5] Kioa v West (1985) 159 CLR 550 at 584-585.
The regime established under the SOP Act involves a staged process for bringing a disputed progress claim before the adjudicator in a timely fashion, and a set of procedures to be followed and matters to be considered by the adjudicator in coming to a determination of the dispute on the papers. It is not necessary for me to set out the detail of the process and procedures; they are set out in the legislation and have been summarised in a number of the authorities.[6]
[6] Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1 at [3]-[18]; The Trustee for Allway Unit Trust Trading as Westside Mechanical Contracting Pty Ltd v R & D Airconditioning Pty Ltd [2018] SASC 46 at [36]-[51].
Relevantly for present purposes, the regime involves a focus upon identifying and delineating the dispute, or joinder of issue, between the parties. In Built Environs Pty Ltd v Tali Engineering Pty Ltd,[7] Blue J described this aspect of the regime in the following terms:[8]
The structure of the Act provides for four stages in the joinder of issue on an adjudication. The first stage requires the claimant to identify in its payment claim the amount of the progress payment claimed to be due and to identify the construction work to which it relates. The second stage requires the respondent in its payment schedule to identify the amount which it claims is due and identify the reasons why it is less than the amount claimed. This results in a fundamental joinder of issues. The structure of sections 13, 14, 17 and 20 are such that a claimant cannot at a subsequent stage introduce a new claim outside the scope of its original payment claim. Similarly, section 20(4) precludes the respondent from introducing at a subsequent stage new grounds for withholding payment outside the scope of those set out in its original payment schedule. The third stage involves the claimant making its adjudication application in respect of the payment claim which it made at the first stage. The fourth stage involves the respondent serving its adjudication response.
[7] Built Environs Pty Ltd v Tali Engineering Pty Ltd [2013] SASC 84.
[8] Built Environs Pty Ltd v Tali Engineering Pty Ltd [2013] SASC 84 at [122] (citations omitted).
The dispute between the parties having been delineated in this way, ss 21 and 22 then govern the adjudicator’s determination of the adjudication application. Under ss 21(1) and (2), the adjudicator must not determine the application until after the period within which the respondent may lodge an adjudication response, and must not consider an adjudication response unless it was made within time. And under s 21(3), the adjudicator must then determine the application as expeditiously as possible, and within 10 business days of the adjudication response.
Section 21(4) of the SOP Act provides that, in determining the adjudication application, the adjudicator:
(a)     may request further written submissions from either party and must give the other party an opportunity to comment on those submissions; and
(b)     may set deadlines for further submissions and comments by the parties; and
(c)     may call a conference of the parties; and
(d)     may carry out an inspection of any matter to which the claim relates.
Whilst s 21(4) thus provides the adjudicator with a discretion, inter alia, to request further submissions and comments by the parties, s 21(6) provides that the adjudicator’s power to determine an application is not affected by the failure of either or both parties to make a submission or comment within time.
Section 22(1) provides that the adjudicator must determine the amount of the progress payment to be paid (referred to as the adjudicated amount), the date on which it is payable and the rate of interest payable.
The matters to be considered by the adjudicator in making this determination are set out in s 22(2).
(2)In determining an adjudication application, the adjudicator is to consider the following matters only:
(a)     the provisions of this Act;
(b)     the provisions of the construction contract from which the application arose;
(c)     the payment claim to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the claimant in support of the claim;
(d)     the payment schedule (if any) to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the respondent in support of the schedule;
(e)     the results of any inspection carried out by the adjudicator of any matter to which the claim relates
Section 22(3) provides that the adjudicator’s determination must be in writing and include the reasons for the determination.
There are several authorities that have considered the content of an adjudicator’s obligation to afford procedural fairness in the context of this regime. On the one hand, the authorities emphasise the need to ensure that the objectives of the regime (namely, the creation of a quick, informal and summary process for the interim determination and enforcement of payment claims) are not undermined, and the consequential need to ensure a practical rather than pedantic approach to what procedural fairness requires. On the other hand, the authorities also emphasise the related need to ensure that adjudication applications are determined in accordance with the parties’ delineation, through the prescribed statutory process, of the dispute between them. As a consequence of this last matter, it has been held in a number of authorities that there will have been a denial of procedural fairness if the adjudicator decides an adjudication application on a basis which was not contended for by either of the parties, and in respect of which the parties have not had an opportunity to make submissions.
By way of illustration, in Built Environs Pty Ltd v Tali Engineering Pty Ltd,[9] the plaintiff claimed a right to set off liquidated damages in its payment schedule. The adjudicator rejected the plaintiff’s claimed entitlement to liquidated damages on the basis that it had been negated by the operation of the prevention principle. Blue J held that this involved a denial of procedural fairness. His Honour explained:[10]
Built Environs was not given adequate notice that Tali was relying upon the prevention principle or that Mr Allan might determine the Adjudication Application by applying the prevention principle. As observed above, in its Adjudication Application, Tali may have been invoking various legal doctrines, including unconscionability, unjust enrichment and estoppel. Tali did not explicitly refer to the prevention principle. It did not address the elements of the prevention principle or the issues which would necessarily arise upon its being invoked. To the knowledge of Mr Allan, Tali had not invoked the prevention principle in its communications with Built Environs prior to Progress Claim 9 and it did not do so in that progress claim. In its Adjudication Response, Built Environs did not refer to the prevention principle. It did not address the elements of the prevention principle or the issues which would necessarily arise.
[9] Built Environs Pty Ltd v Tali Engineering Pty Ltd [2013] SASC 84.
[10] Built Environs Pty Ltd v Tali Engineering Pty Ltd [2013] SASC 84 at [155].
Similarly, in Ostwald Bros Pty Ltd v Jaylon Pacific Pty Ltd,[11] the adjudicator rejected the plaintiff’s claimed entitlement to set off liquidated damages. Burns J held that this involved a denial of procedural fairness because the adjudicator did so on the basis of a construction of the relevant contractual provisions for which neither of the parties had contended.
[11] Ostwald Bros Pty Ltd v Jaylon Pacific Pty Ltd [2016] QSC 240.
Burns J explained:[12]
It may be immediately observed from the adjudicator’s treatment of the competing claims for extensions of time and liquidated damages that he decided each on a basis that was not the subject of submissions from either Ostwald or Jaylon. A principal focus of those submissions was on whether the “prevention principle” operated but that was the very issue the adjudicator found it unnecessary to decide. Instead, the adjudicator focussed, and then decided the adjudication, on a construction of clauses 5.4 and 5.7 that neither party had contended. In doing so, the adjudicator seemed to construe those provisions as requiring Ostwald to prove that Jaylon was not entitled to any extensions of time and that, in the absence of such proof, Jaylon must succeed and Ostwald must fail.
[12] Ostwald Bros Pty Ltd v Jaylon Pacific Pty Ltd [2016] QSC 240 at [24].
His Honour later added:[13]
An error in the interpretation of a contractual provision will not usually amount to a jurisdictional error, although where it appears that the adjudicator has misunderstood the scope of his or her jurisdiction the position may well be different. It is however unnecessary for me to decide whether what the adjudicator did in this case rendered his decision voidable. That is because, as I earlier observed, regardless of the merits or otherwise of the adjudicator’s construction of the subcontract, he decided Ostwald’s claim for liquidated damages on a basis that was not the subject of submissions from either Ostwald or Jaylon.
It is well settled that a substantial denial of natural justice may invalidate an adjudication decision with the consequence that such a decision may be declared void. Where an adjudicator decides a dispute on a basis for which neither party contended, there will be a substantial denial of natural justice unless it can be said that no submission could have been made to the adjudicator which might have produced a different result.
[13] Ostwald Bros Pty Ltd v Jaylon Pacific Pty Ltd [2016] QSC 240 at [29]-[30], omitting footnotes.
In John Holland Pty Ltd v TAC Pacific Pty Ltd[14] the plaintiff contended that the adjudicator denied it procedural fairness by determining an issue in dispute on a basis not contended for by the parties, and in particular on the basis of the adjudicator’s view that an authority upon which the plaintiff had relied had been effectively overruled by an appellate authority to which no reference had been made during the adjudication process. The defendant, on the other hand, contended that there had been no denial of procedural fairness because the parties had both made submissions in relation to the issue in dispute, and to which the appellate authority related; and because the need to ensure “speed, simplicity and cost effectiveness in determining an interim payment” meant that it was unnecessary for the adjudicator to seek further submissions in relation to an authority which the adjudicator considered merely to be an extension of the principles addressed by the parties.[15]
[14] John Holland Pty Ltd v TAC Pacific Pty Ltd [2010] 1 Qd R 302.
[15] John Holland Pty Ltd v TAC Pacific Pty Ltd [2010] 1 Qd R 302 at [49].

In upholding the plaintiff’s contention that there had been a denial of procedural fairness, Applegarth J held that it was not sufficient that the parties had made submissions in relation to the general issue in dispute. An assessment of whether procedural fairness had been afforded required consideration of whether there had been an opportunity to address the particular basis upon which that issue was determined. In other words, where an adjudicator proposes to determine an issue on a basis other than that contended for by the parties (in that case, on the basis of a view that an authority relied upon by the parties was incorrect), then procedural fairness required that the parties be given notice of this and an opportunity to be heard.[16]
[16] John Holland Pty Ltd v TAC Pacific Pty Ltd [2010] 1 Qd R 302 at [50]-[51].
On the other hand, in Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd,[17] the New South Wales Court of Appeal upheld the primary judge’s rejection of the head contractor’s contention that the adjudicator had denied it procedural fairness in rejecting its claimed entitlement to liquidated damages by reason of the prevention principle. In so concluding, the Court held that the potential operation of that principle had been sufficiently raised on the material before the adjudicator.
[17] Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82.
McColl JA (with whom Beazley ACJ and MacFarlan JA agreed) noted the quick time and abbreviated form in which the payment claim and payment schedules were to be prepared. Her Honour added:[18]
Nevertheless, while a payment claim and a payment schedule should not be required to be as precise and as particularised as a pleading, precision and particularity must be required to a degree reasonably sufficient to apprise the parties of the real issues in the dispute.
[18] Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82 at [110].
McColl JA also observed that the interim nature of an adjudication determination underscored the element of “rough justice” contemplated by the adjudication procedure, adding that there was “no, or little, time for fine arguments about legal principle.”[19]
[19] Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82 at [130]; see also Grocon Constructors Pty Ltd v Planit Cocciardi Joint Venture (No 2) (2009) 26 VR 172 at [143].
In then applying this approach to the case at hand, McColl JA held that despite it not including explicit reference in terms to the prevention principle, consideration of the material relied upon by the parties made it apparent that “its application was squarely an issue in the adjudication”, and that “[i]ts inferential application by the adjudicator could not, or should not, have come as a surprise to Probuild.”[20] While expressed in lay language, the subcontractor’s contentions had invoked the underlying rationale of the prevention principle.[21] There was thus no denial of procedural fairness in the adjudicator’s application of that principle to defeat the head contractor’s claimed entitlement to liquidated damages.
[20] Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82 at [131].
[21] Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82 at [135].
As the cases illustrate,[22] it is not always clear whether an adjudicator has determined a matter on a basis which was not contended for by the parties, or which had not otherwise been put in issue such that the parties can be said to have had an opportunity to address it. Whether this is so will often depend upon the level of abstraction or specificity at which one articulates the issues in dispute.
[22] See also the references to Abel Point Marina (Whitsundays) Pty Ltd v Uher [2006] QSC 295; David Hurst Constructions Pty Ltd v Helen Durham [2008] NSWSC 318 and Caltex Refineries (Qld) Pty Ltd v Allstate Access (Australia) Pty Ltd [2014] QSC 223 later in these reasons.
At one extreme, it will rarely be sufficient to avoid a denial of procedural fairness that a general topic or contractual clause has been raised or put in issue by the parties; procedural fairness will generally require a more focussed opportunity to address the basis relied upon by the adjudicator for reaching a conclusion in relation to that topic or clause.[23] At the other extreme, procedural fairness does not require that a party have had an opportunity to address every nuance, aspect or detail of the adjudicator’s reasoning process. However, beyond these extremes it is difficult to generalise as to the level of abstraction or specificity at which the obligation to afford procedural fairness must be addressed in a particular case. It will often be a question of degree, with much depending upon the nature and extent of the dispute between the parties, and the positions and submissions each has advanced at the various stages of the adjudication process.
[23] John Holland Pty Ltd v TAC Pacific Pty Ltd [2010] 1 Qd R 302 at [50].
Returning to the decision in Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd, I note that McColl JA made passing reference to the adjudicator’s discretion to seek further assistance from the parties under s 21(4). Her Honour observed that while the adjudicator’s primary obligation was to make a decision on the material provided by the parties, the adjudicator had a discretion to take any of the steps referred to in ss 21(4)(a)-(d); namely, to request further submissions, call a conference of the parties, or carry out an inspection. Her Honour explained that the exercise of this discretion will depend upon the adjudicator’s judgment as to whether or not he or she will be assisted by further submissions in reaching a decision within the constraints (including time constraints) imposed by the legislation. Her Honour also observed that at least one intended function of s 21(4) was to require an adjudicator minded to come to a particular determination on a particular ground for which neither party had contended to give the parties notice of that intention so that they may make submissions in relation to that ground.[24]
[24] Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82 at [108]; citing Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140 at [88] and Musico v Davenport [2003] NSWSC 977 at [107].
In the circumstances of that case, and in particular because the material relied upon by the parties had squarely raised the operation of the prevention principle, no complaint could be made of the adjudicator’s decision not to exercise his discretion to seek further submissions. However, I observe that in circumstances where an adjudicator considers that it may be appropriate or necessary to decide an application on a basis not raised or contended for by the parties, then the power to request further submission under s 21(4)(a) may operate as a mechanism for ensuring that the parties are afforded procedural fairness.
This relationship between an adjudicator’s obligation to afford procedural fairness and the discretionary mechanism available under s 21(4) had earlier been considered by McDougall J in Musico v Davenport.[25] In that case the plaintiff (Musico) contended that by reaching conclusions on various matters that had not been advanced by the defendant (Grosvenor), and of which Musico had no notice, the adjudicator (Mr Davenport) had denied it procedural fairness. In accepting that there had been a denial of procedural fairness, McDougall J explained:[26]
As to two of those matters – namely, those referred to in paras 3(a) and 3(d), Grosvenor’s position appears to be that, although the matters were not explicitly raised, nonetheless, because, in effect, Mr Davenport was required to consider the provisions of the contract, the provisions of the payment schedule and the provisions of the Act, it was open to him to reach the view that he did, notwithstanding that Grosvenor had not advanced or contended for those views in its adjudication application.
If that be Grosvenor’s position it is, in my opinion, wrong. It may readily be accepted that the Act provides for a somewhat rough and ready way of assessing a builder’s entitlement to progress claims. It may also be accepted that the procedure is intended not only to be swift, but also to be carried out with the minimum amount of formality and expense. Nonetheless, what an adjudicator is required to do is to decide the dispute between the parties. Under the scheme of the Act, that dispute is advanced by the parties through their adjudication application and adjudication response (which, no doubt, will usually incorporate the antecedent payment claim and payment schedule). If an adjudicator is minded to come to a particular determination on a particular ground for which neither party has contended then, in my opinion, the requirements of natural justice require the adjudicator to give the parties notice of that intention so that they may put submissions on it. In my opinion, this is a purpose intended to be served by s 21(4) of the Act (although the functions of s 21(4) may not be limited to this).
It follows, in my opinion, that where an adjudicator determines an adjudication application upon a basis that neither party has notified to the other or contended for, and that the adjudicator has not notified to the parties, there is a breach of the fundamental requirement of natural justice that a party to a dispute have “a reasonable opportunity of learning what is alleged against him and of putting forward his own case in answer to it”.
[25] Musico v Davenport [2003] NSWSC 977.
[26] Musico v Davenport [2003] NSWSC 977 at [106]-[108].
I observe that the existence of s 21(6) (which permits the adjudicator to determine a matter in the event that submissions are not made within time) does not alter the analysis. This subsection says nothing about the circumstances in which an adjudicator can or should request further submissions under s 21(4); nor does it support any entitlement on the part of an adjudicator to determine an issue without the parties having had an opportunity to put submissions on that issue. Rather, s 21(6) merely provides that where an adjudicator has requested further submissions under s 21(4), but a party has failed to provide any submissions within time, then the adjudicator’s jurisdiction to determine that issue is not affected by that failure. The evident purpose of s 21(6) is to prevent a party from depriving an adjudicator of jurisdiction by refusing or failing to comply with the adjudicator’s request.
For completeness, I mention one further aspect of the decision-making regime under the SOP Act (and its interstate equivalents) that has potential implications from a procedural fairness perspective. It arises from the provision in s 20(4) of the SOP Act to the effect that a respondent to an adjudication application cannot include in their adjudication response any reasons for withholding payment unless those reasons have already been included in the payment schedule provided to the claimant. A submission included within an adjudication response contrary to s 20(4) is not “duly made” for the purposes of s 22(2)(d) and therefore cannot be considered by the adjudicator.[27]
[27] State Water Corporation v Civil Team Engineering Pty Ltd [2013] NSWSC 1879 at [69].
This is consistent with the legislative intention to ensure that disputes are determined in accordance with the parties’ delineation of their dispute, and to avoid the parties attempting to alter that delineation with the introduction of new issues or contentions at a late stage in the process.[28] But it also has implications for an adjudicator’s approach to ensuring procedural fairness. As Sackar J explained in State Water Corporation v Civil Team Engineering Pty Ltd:[29]
However, it must be remembered that the claimant's and respondent's submissions (duly made) are only two of a number of matters that the adjudicator is required to consider. Accordingly, an adjudicator should not ignore something of real relevance to issues arising under s 22(2)(a) or (b) (or both), simply because the matter was not raised in submissions duly made by the parties. … That applies even where the adjudicator only gained an awareness of those particular matters (i.e. of particular provisions of the relevant construction contract or the Act, as opposed to the facts and circumstances of the particular case) from having come into contact with submissions not duly made. … But where that situation arises, the adjudicator must bear in mind the need to afford natural justice to the parties. To address that problem, the adjudicator may wish to call for further submissions (s 21(4)(a)) or arrange a conference (s 21(4)(c)).
[28] Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140 at [67].
[29] State Water Corporation v Civil Team Engineering Pty Ltd [2013] NSWSC 1879 at [70].
Analysis
I have earlier set out the key passage from the Adjudicator’s reasoning in rejecting ADJV’s claimed entitlement to liquidated damages. I also summarised the key propositions in that reasoning, labelling them propositions (i) to (v). Put simply, the Adjudicator concluded that the dates relied upon by ADJV in its claim for liquidated damages (being dates from the column headed “Delivery Due” in the Purchase Order and Purchase Change Orders) were not the “Date[s] for Delivery” for the purposes of clause 9.8 of the Contract.
ADJV contends that in rejecting its claim for liquidated damages on this basis, the Adjudicator did so on a basis not contended for by Ferretti, and in respect of which it did not have the opportunity to put submissions. It contends that in accordance with the approach indicated in the authorities to which I have referred – and, in particular, Built Environs Pty Ltd v Tali Engineering Pty Ltd,[30] Ostwald Bros Pty Ltd v Jaylon Pacific Pty Ltd[31] and John Holland Pty Ltd v TAC Pacific Pty Ltd[32] – this involved a denial of procedural fairness.
[30] Built Environs Pty Ltd v Tali Engineering Pty Ltd [2013] SASC 84.
[31] Ostwald Bros Pty Ltd v Jaylon Pacific Pty Ltd [2016] QSC 240.
[32] John Holland Pty Ltd v TAC Pacific Pty Ltd [2010] 1 Qd R 302.
I accept, and I do not think it was challenged, that Ferretti did not advance any contentions during the adjudication process that involved reliance upon any of the propositions (i) to (v) underpinning the Adjudicator’s reasoning for rejecting ADJV’s claim to liquidated damages, and that ADJV did not therefore put any submissions in response to these propositions. In that sense, it may be accepted that the Adjudicator determined ADJV’s right to liquidated damages on a basis not contended for by Ferretti, and in respect of which the parties did not make submissions.
However, counsel for Ferretti contended that this was not sufficient to establish a denial of procedural fairness. His primary contention in this respect was that as ADJV had claimed an entitlement to liquidated damages under clause 9.8, it carried the onus on that issue, and the Adjudicator was entitled to reject that claim if he did not think it could be sustained under the Contract on the material before him. In other words, to the extent that there was a deficiency in ADJV’s proof, or the Adjudicator was not otherwise satisfied as to ADJV’s contractual entitlement to liquidated damages, then the Adjudicator was entitled to reject the claim. Counsel referred in this respect to the Adjudicator’s right and obligation under s 22(2)(b) to have regard to the provisions of the Contract, and contended that this entitled the Adjudicator to reject the claim for liquidated damages on any basis arising under the Contract without there being any want of procedural fairness.
In the alternative, counsel for Ferretti contended that to the extent it was necessary or appropriate to descend to a consideration of whether a particular issue or contention had been raised by the parties, it was enough in the context of this case that the topic of the dates by reference to which liquidated damages were to be calculated had been put in issue.
Put another way, Ferretti’s primary and alternative contentions were that it was sufficient that the general topic of liquidated damages, or in the alternative the dates by reference to which liquidated damages were to be calculated, had been put in issue. These topics having been put in issue, it followed on Ferretti’s argument that the parties had had an opportunity to be heard on these topics, and hence there had not been any denial of procedural fairness.
I reject both Ferretti’s primary and alternative contentions. While Ferretti’s counsel was right to emphasise the informal and interim nature of the adjudication process under the SOP Act, and the relevance of these matters to a consideration of the content of the adjudicator’s obligation to afford procedural fairness, the authorities to which I have referred make it plain that the obligation to afford procedural fairness is not to be considered or addressed at this level of generality or abstraction.
It is true that the courts must be astute not to take too pedantic approach lest complaints of a denial of procedural fairness become a stalking horse for parties seeking to obtain a second opportunity to be heard in relation to matters determined adverse to them. To allow this to occur would indeed be to undermine the objective of the adjudication process provided for in the SOP Act.
But even allowing for this concern, and despite the adjudicator being required under s 22(2)(b) to have regard to the provision of the Contract, the adjudicator is not left at large to determine the adjudication application on any ground that he or she considers appropriate under the provisions of the Contract. Rather, the parties to an adjudication are entitled to proceed (and indeed the statutory regime is predicated upon them proceeding) on the basis of the parties’ delineation of the dispute between them through the payment claim, payment schedule, adjudication application and adjudication response. The obvious intention of the statutory regime of achieving a quick and efficient determination and enforcement of claims, and the consequentially very short timeframes for the parties’ responses and submissions, make it essential that the parties be able to readily ascertain what is in issue and confine their responses and submissions accordingly.
In the present case, in considering ADJV’s claimed entitlement to liquidated damages, the Adjudicator was constrained to a consideration of the matters raised by the parties. The only grounds available for rejecting that claim, without at least requesting further submissions from the parties under s 21(4), were those raised by Ferretti in its Adjudication Application.
While Ferretti contended for different dates by which any liquidated damages were to be calculated, it is significant that it did so on the basis of a contention that the calculation was governed by timeframes determined by the quotation documentation exchanged between the parties (that is, the quotation contention and the subsequent tranches contention). This basis for opposing ADJV’s claim for liquidated damages was expressly rejected by the Adjudicator on the ground that the quotation documents did not form part of the Contract; and that ADJV’s right to liquidated damages fell to be determined in accordance with clause 9.8 of the Contract. And Ferretti did not ever put an alternative contention to the effect that even if the dates for calculating liquidated damages were those prescribed by clause 9.8 of the Contract, ADJV was nevertheless not entitled to rely upon the dates that it relied upon from the column headed “Delivery Due” for the items of fabrication work in the Purchase Order and Purchase Change Order. Ferretti did not put any submission to the effect that a “Date for Delivery” (as defined in clause 1.1 of the Contract) had not been, or could not be, ascertained for the purposes of clause 9.8 of the Contract.

I do not think that Ferretti can be said, by its silence as to the applicable dates for the purposes of clause 9.8, to have put ADJV to proof on the issue of the applicable dates under clause 9.8. And nor do I think that it ought to have been obvious to ADJV, or that ADJV ought to have anticipated, that the Adjudicator would approach the applicable dates in the manner he did. In the absence of any apparent contest in the submissions or correspondence from Ferretti as to the appropriateness of the dates it had used for the purposes of clause 9.8 (that is, assuming rejection of Ferretti’s argument about dates based up the quotation documents), ADJV was in my view entitled to proceed on the basis that these dates were not in issue.
Put another way, ADJV invoked clause 9.8 of the Contract in its claim for liquidated damages. In that very general sense, it might be said that it put that clause and its construction in issue. But Ferretti did not ever join issue with ADJV’s construction or application of that clause, and in particular the identification of the Date(s) for Delivery under that clause. Rather, Ferretti contested ADJV’s claimed entitlement to liquidated damages on grounds that were extraneous to the construction of clause 9.8, and the identification of the Date(s) for Delivery under that clause, implicit in ADJV’s claim.
In my view, the present case is distinguishable from Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd.[33] In that case, while the subcontractor’s submissions did not mention the prevention principle in terms, they had invoked the underlying rationale of that principle and had in that sense put the operation of the principle squarely in issue. The present case is more akin to the circumstances of cases such as Built Environs Pty Ltd v Tali Engineering Pty Ltd,[34] Ostwald Bros Pty Ltd v Jaylon Pacific Pty Ltd[35] and John Holland Pty Ltd v TAC Pacific Pty Ltd[36]; that is, where the adjudicator decided an issue on a basis not contended for by the parties.
[33] Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82.
[34] Built Environs Pty Ltd v Tali Engineering Pty Ltd [2013] SASC 84.
[35] Ostwald Bros Pty Ltd v Jaylon Pacific Pty Ltd [2016] QSC 240.
[36] John Holland Pty Ltd v TAC Pacific Pty Ltd [2010] 1 Qd R 302.
In my view, the present case is also distinguishable from two further authorities relied upon by Ferretti. In the first of these, Abel Point Marina (Whitsundays) Pty Ltd v Uher,[37] the applicant alleged that the adjudicator denied it procedural fairness by rejecting its claimed entitlement to liquidated damages on the basis that the material before him did not enable him to make any finding as to the Date of Practical Completion and Date for Practical Completion. A finding as to those dates was necessary in order to make an award of liquidated damages. In rejecting the allegation that there had been a denial of procedural fairness, Wilson J said:[38]
Here the adjudicator did all that was required of him to afford the parties procedural fairness. SSM claimed to be entitled to a progress claim in a certain amount. Abel Point claimed to be entitled to set-off liquidated damages. The adjudicator's primary obligation was to make a decision on the material before him. He could not determine Abel Point’s right to the set-off without making findings as to the Date for Practical Completion and the Date of Practical Completion and in his view such findings could not be made on the material before him. It is not altogether clear whether the further submissions he could have called for might have included further relevant documentation, but assuming they could have, the critical point is that he was not obliged to seek further submissions. If the submissions before him were such that he could not make findings as to these dates, then he could not be satisfied that Abel Point was entitled to set-off liquidated damages, and he rightly determined that issue against Abel Point. His doing so did not involve any breach of natural justice.
[37] Abel Point Marina (Whitsundays) Pty Ltd v Uher [2006] QSC 295.
[38] Abel Point Marina (Whitsundays) Pty Ltd v Uher [2006] QSC 295 at [20].
While at first blush there appears some similarity between the circumstances of that case and the present case, there remains a critical difference. In that case, unlike the present case, the respondent had clearly put in issue the factual issues underpinning identification of the relevant dates, and in particular the sufficiency of the information put forward by the applicant in relation to the same.
The second of the further authorities relied upon by Ferretti was David Hurst Constructions Pty Ltd v Helen Durham.[39] In that case, McDougall J rejected the plaintiff’s various complaints of a denial of procedural fairness by the adjudicator. Those complaints were rejected on the basis that the matters relied upon by the adjudicator had been raised in the submissions and materials before the adjudicator, and hence the adjudicator had not “stepped outside the dispute posed for her consideration.”[40] In respect of one matter, involving the application of two particular contractual provisions (clauses 34.9 and 37.1), his Honour reached this conclusion despite observing that the adjudicator “had not been favoured with submissions from the parties as to either of these provisions.”[41] McDougall J explained:[42]
However, the dispute had been raised and in my view it was not only open to but incumbent upon the Adjudicator to resolve it by directing herself in accordance with the relevant contractual conditions. This she did.
[39] David Hurst Constructions Pty Ltd v Helen Durham [2008] NSWSC 318.
[40] David Hurst Constructions Pty Ltd v Helen Durham [2008] NSWSC 318 at [14]-[22], [37].
[41] David Hurst Constructions Pty Ltd v Helen Durham [2008] NSWSC 318 at [37].
[42] David Hurst Constructions Pty Ltd v Helen Durham [2008] NSWSC 318 at [37].
Again, the distinguishing feature was that in that case, unlike the present case, the adjudicator did not step outside the dispute delineated by the parties. In respect of the application of clauses 34.9 and 37.1, it appears that while the particular clauses had not been addressed in terms by the parties, their application had nevertheless been put in issue by the parties.
On the other hand, the decision of McMurdo J in Caltex Refineries (Qld) Pty Ltd v Allstate Access (Australia) Pty Ltd,[43] provides support for the approach contended for by ADJV in the present case. In that case, the plaintiff argued that the adjudicator denied it procedural fairness by resolving an issue of contractual construction against it. While the defendant had contested the plaintiff’s construction of the relevant provisions, the adjudicator resolved the issue against the plaintiff on a basis that differed from that advanced by the defendant.
[43] Caltex Refineries (Qld) Pty Ltd v Allstate Access (Australia) Pty Ltd [2014] QSC 223.
In upholding the plaintiff’s claim, McMurdo J commenced by accepting that ordinarily an error in the interpretation of a contract would not involve a jurisdictional error for which the decision might be set aside.[44] Rather, given the adjudicator’s mandate to construe and apply the terms of the relevant contract, any such error would ordinarily be an error within jurisdiction and hence which the adjudicator was empowered to make. However, as his Honour recognised, the position may be otherwise, and the decision vulnerable to being set aside, where the adjudicator adopts a construction not contended for by either of the parties. McMurdo J’s reasons for concluding that the adjudicator in that case failed to afford procedural fairness were as follows:[45]
As I have set out, the submissions of the Caltex parties in their adjudication responses seemed to anticipate a risk that the adjudicator would reach a view on this part of the claims which was favourable to Allstate but different from Allstate’s own argument. Their submissions warned the adjudicator that he should not do so for that would deny the Caltex parties natural justice. This suggests that the Caltex parties were alert to the possibility of reasoning of this kind. But it is another thing to say that they had a proper opportunity to address the particular reasoning which was employed by Mr Hillman. In my conclusion, this reasoning could not have been reasonably anticipated by the Caltex parties as the basis for the adjudicator’s decisions. Not only was it different from the submissions made by Allstate, it was inconsistent with those submissions because the implied term for which Allstate argued was premised on the absence of an express term. Moreover it was inconsistent with the reasoning in earlier adjudications to which Mr Hillman was directed by the submissions for Allstate. I will describe that reasoning below when discussing the argument by Allstate that the parties were bound by an issue estoppel.
[44] Caltex Refineries (Qld) Pty Ltd v Allstate Access (Australia) Pty Ltd [2014] QSC 223 at [36]-[37].
[45] Caltex Refineries (Qld) Pty Ltd v Allstate Access (Australia) Pty Ltd [2014] QSC 223 at [39].
Returning to the present case, if, as he apparently did, the Adjudicator considered it appropriate or necessary to consider whether the dates relied upon by ADJV were the dates contemplated by clause 9.8 of the Contract, then in circumstances where Ferretti had not challenged ADJV’s use of those dates for the purposes of the application of clause 9.8 of the Contract, the Adjudicator ought to have requested submissions from the parties under s 21(4) before deciding this issue adversely to ADJV.
Contrary to the submissions of Ferretti, to so reason is not to overlook the discretionary nature of the power under s 21(4). In cases where a matter has been raised by the parties, it is entirely a matter for the Adjudicator’s discretion whether he or she will be assisted by further submissions. No concern with procedural fairness arises. However, in a case such as the present, where the Adjudicator intends to address an issue or contention not raised by the parties, then a concern with procedural fairness does arise. The Adjudicator might have taken the approach that as the dates adopted by ADJV for the purposes of clause 9.8 had not been challenged (other than through the quotation contention and the subsequent tranches contention), they could be relied upon by him. On the other hand, if, as happened here, the Adjudicator considered that it was necessary or appropriate for him to form his own view as to the appropriate dates for the purposes of clause 9.8, then (in conformity with the approach indicated in the passages from the reasons of McDougall J in Musico v Davenport[46] and McColl JA in Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd[47] to which I have referred), procedural fairness required that ADJV be given an opportunity to make submissions in relation to this issue. Recognition that s 21(4)(a) would have been the mechanism for requesting those further submissions, and hence for achieving procedural fairness, does not involve any denial of the discretionary nature of the power under that subsection to request further submissions.
[46] Musico v Davenport [2003] NSWSC 977 at [106]-[109].
[47] Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82 at [108].
For the above reasons, I have concluded that by rejecting ADJV’s claimed entitlement to liquidated damages on a basis not contended for by Ferretti, the Adjudicator denied ADJV procedural fairness.
Availability of relief
Having concluded that the adjudicator failed to afford ADJV procedural fairness, and thus fell into jurisdictional error, it remains for me to consider whether I should grant the relief sought.
Even in circumstances where jurisdictional error has been established, the Court may, in its discretion, withhold relief. In the context of error in the form of a failure to afford procedural fairness, several authorities have held that the plaintiff must establish a substantial or material failure in order to justify the court’s discretionary intervention. That said, it is apparent from those authorities that this threshold for intervention is a relatively low one. Essentially, as long as there were submissions or information upon which the plaintiff might have relied which had some prospect of materially influencing the outcome of the adjudicator’s determination, then that will suffice.
In John Holland Pty Ltd v TAC Pacific Pty Ltd, Applegarth J held that there will be a substantial denial of procedural fairness entitling the plaintiff to relief where a party was denied the opportunity to makes submissions with a “real prospect” of influencing the result, or which “as a matter of reality and not mere speculation, might have affected the determination”.[48] Other authorities have expressed the threshold in the even less onerous terms that, where the adjudicator decides a dispute on a basis for which neither party contended, this will involve a substantial denial of procedural fairness “unless it can be said that no submission could have been made to the adjudicator which might have produced a different result.”[49]
[48] John Holland Pty Ltd v TAC Pacific Pty Ltd [2010] 1 Qd R 302 at [59]-[60].
[49] Watkins Contracting Pty Ltd v Hyatt Ground Engineering Pty Ltd [2018] QSC 65 at [64]; see also Ostwald Bros Pty Ltd v Jaylon Pacific Pty Ltd [2016] QSC 240 at [30].
In my view, the denial of procedural fairness in this case was plainly a substantial one. It related to the identification of the “Date[s] for Delivery” for the purposes of determining ADJV’s entitlement to liquidated damages. As such it related to an issue that was decisive of ADJV’s entitlement to a claimed amount of $201,110. This was obviously a material sum in the context of the present matter. Further, and significantly, I am satisfied that the submissions which ADJV was denied an opportunity to make had a real prospect of influencing the result in relation to the issue of liquidated damages.
The submissions that ADJV contends it would have made include:
(i)that the contractual definition of “Date for Delivery” for the purposes of clause 9.8 does not require the use of any particular form of words. Rather, the “Date for Delivery” is defined in clause 1.1 by reference merely to “the date set out in the Purchase Order as may be extended pursuant to clause 8”, and hence is apt to apply to a date in the column of the Purchase Order and Purchase Change Orders headed “Delivery Due”;
(ii)that while the Purchase Order and Purchase Change Orders included more than one date in the column headed “Delivery Due”, there was a sound basis for ADJV to have used the dates that corresponded to the items of fabrication work (as opposed to materials); and
(iii)that the clause 8 power to issue Purchase Change Orders expressly contemplated ADJV specifying matters of timing in respect of the work to which they related, and hence empowered ADJV to nominate a “Date for Delivery” of the fabrication work the subject of those documents.
On the face of the Adjudicator’s reasons, it appears that he may not have appreciated the potential significance of (i) the general terms of the definition of “Date for Delivery”, (ii) the selection of dates that related to fabrication work rather than materials and (iii) the provisions of the clause 8 power to issue Purchase Change Orders that contemplate the specification of matters of timing. It is not necessary for me to reach any final view as to the merits of ADJV’s submissions in relation to the identification of the relevant Date(s) for Delivery for the purposes of awarding liquidated damages, and accordingly I have not done so. It is enough that I have concluded that these submissions had a “real prospect” of influencing the result in relation to liquidated damages; that they might have, as a matter of reality and not mere speculation, affected the Adjudicator’s Determination.
Finally, and for completeness, it was not suggested by Ferretti that the Adjudicator’s decision in relation to liquidated damages was severable from the other components of the Determination. It was accepted that if I was persuaded that the Determination was infected by jurisdictional error warranting the Court’s intervention, then I should set aside the Determination and order repayment of the sum paid to Ferretti by ADJV pursuant to that Determination.
Conclusion and orders
For the reasons set out, I have concluded that the Adjudicator’s Determination was infected by jurisdictional error warranting orders that it be set aside, and that the monies paid by ADJV to Ferretti should be repaid.